SC announces framework to facilitate cryptocurrency trading

SC announces framework to facilitate cryptocurrency trading
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KUALA LUMPUR (Jan 31): The Securities Commission Malaysia (SC) has amended its Guidelines on Recognised Markets to introduce new requirements for electronic platforms that facilitate the trading of digital assets such as bitcoin and ethereum.

In a statement today, the regulator said any person who is interested in operating a digital asset platform is required to apply to the SC by March 1 to be registered as a recognised market operator.

“The new framework is part of the SC’s efforts to promote innovation while ensuring investor protection in the trading of digital assets,” said SC chairman Datuk Syed Zaid Albar.

While there is a framework, he reminded investors to be mindful of the risks involved when dealing in digital assets, such as volatility in prices and liquidity risks.

Among the changes made in the revised guidelines, the SC clarified that an operator must be structured as a body corporate unless otherwise specified and had imposed several criteria for registration of the operators.

These include the requirement that the key members of the applying operator — such as the directors and chief executives — are equipped with relevant experience and track record in managing a market or have not been charged or had any civil action initiated against them in a court of law.

Applicants will also need to satisfy the SC that it has a clear or unique value proposition or will contribute to the overall development of the capital market, as well as the appropriate security arrangements which include maintaining a secured environment pursuant to the Guidelines on Management of Cyber Risk and other relevant guidelines.

On Jan 17, the SC announced a transitional period for digital asset platform operators until March 1, while awaiting the relevant guidelines to be issued by the regulator.

During this period, these platform operators are not permitted to accept new investors and will only be allowed to facilitate the withdrawal or transfer of client assets with the written instruction of the investor.

While the framework for digital exchanges has been released, the SC has yet to introduce the regulations to be imposed on initial coin offerings (ICOs).

During an engagement with the media earlier this month, the regulator hinted that the ICO regulations could include standards for white papers — similar to prospectus requirements for companies looking to conduct an initial public offering — and investment thresholds for investors.